Federal and state college financial aid

In this article

Researching available resources

Federal programs

State programs

Other financial aid resources

The cost of financing a child's college education can be daunting to many families. Generally the family is the primary support vehicle; however, financial assistance does exist. In addition to private sources such as trade unions, fraternal or service organizations, professional associations and religious groups, numerous state and federal aid programs exist.

A thorough investigation of all assistance programs is a fundamental part of financing a college education.

Under present aid programs, a parent generally does not have to be in a low-income bracket to receive financial assistance. Most need-based programs take into account family living expenses, the number of children in the family, and how many children are in college.

Federal Programs: Six Major Sources Of Aid

The federal government administers six major financial assistance programs. Three of these programs are direct assistance programs; that is, the assistance goes directly to the student. The other three programs are administered through the college that the student attends; that is, funds are sent directly to the college, which in turn dispenses the money to the student in accordance with federal guidelines.

Pell Grants

The Pell Grant (formerly the Basic Educational Opportunity Grant Program) was named for Senator Claiborne Pell, who sponsored the legislation that established the program. A Pell Grant is based solely on financial need. The amount of the award is based on student need (within certain limits) and on how much money Congress appropriates to the program each year. It is important to apply for a Pell Grant even if you think you won't qualify, since many college and state aid programs require it. Just check the proper box on the financial aid application.

Stafford Student Loans

The Stafford Student Loan (formerly the Guaranteed Student Loan) is a federally subsidized loan program that allows the student to borrow from private lenders and the government at low interest rates. Families with high incomes are eligible for the program if certain needs tests are satisfied. The loan is insured either by the federal government or a state agency.

Banks and other lending institutions voluntarily take part in the loan program. Repayment of principal and interest is deferred until six months after a student graduates or leaves school, and standard repayment is made over a 5- to 10-year period depending upon the amount owed.

An undergraduate may borrow up to certain limits each school year under the program. The government pays the interest for all undergraduate and graduate school years and for six months after the last class.

Parent Loans For Undergraduate Students

Parent Loans for Undergraduate Students (PLUS) loans are available to parents of dependent undergraduate students.

Repayment of a PLUS loan begins 60 days after parents receive the money, and each lender establishes a repayment period of up to 10 years. Unlike Stafford student loans, payments on a PLUS loan must begin within 60 days of receiving the full loan.

Supplemental Education Opportunity Grant

A Supplemental Education Opportunity Grant (SEOG) is a grant to a student with demonstrated financial need. The money is sent, however, by the federal government directly to the colleges, which determine the award amount and dispense the money to the students. (These are in addition to Pell Grants.)

The Department of Education allocates a specific amount of money to each participating college. Once distributed, there are no additional sums. Applications are made through the academic institution's office of financial aid. Early application is strongly recommended.

College Work-Study Program

The College Work-Study Program is a program administered by each participating college to provide employment for students who demonstrate financial need. The federal government grants funds to colleges for this purpose. Students normally obtain employment under this program as part of an overall financial aid package. They generally work 12 to 15 hours per week during school sessions and up to 40 hours a week during vacation periods.

Examples of college employment include library clerks, faculty aides, maintenance workers, and cafeteria workers. The awards are determined by the colleges, and once a student has earned the full award amount, employment is terminated for that academic year.

Application is made to the college financial aid office. Eligibility is based solely on financial need. Students must be enrolled at least half-time in an accredited college and maintain good academic standing while employed. These earnings will not reduce the student's financial aid eligibility. However, funds are limited, so apply for financial aid and work-study early.

The Perkins Loan

Perkins Loans (formerly National Direct Student Loans) are administered by colleges that also act as lenders. Eligibility is based on the student's calculated need. Although the interest rate is low, funds are limited and students should submit the financial aid application early. A student will pay no interest while still in school. There is a nine-month grace period after leaving college. Repayment is stretched out over 10 years.

State Programs: Procedures Vary

State governments also offer a variety of assistance. But most state assistance is available only to state residents attending schools within that state. Some states do make exceptions and permit state residents to attend out-of-state schools. A few states allow nonresidents to receive assistance while attending a school within the state, or have reciprocity arrangements with other states.

Many states have special programs for teachers and National Guard enlistees. Others offer work-study programs and special academic supplements.

Application procedures vary from state to state. While most states allow the student to use one of the same needs analysis application forms used by the federal programs, some states do require separate application forms that must be completed for state programs. A student may find out about state programs and requirements through their high school guidance counselor, college financial aid office, or a state agency.

It is important to begin early and thoroughly investigate all potential sources of financial aid. Your child's college placement office can be a good starting point for information on financial aid sources. And, as with all important financial goals, your financial professional can help you take the steps to build the funds you'll need for your best investment, your children's college education.

Other Financial Aid Sources

ROTC -- Uncle Sam hands out millions of dollars each year to members of the Reserve Officers Training Corps. Recipients must serve up to eight years in the military.

National Merit Scholarships -- Each year, 8,300 top students win awards of up to $2,500. Recipients are chosen from among the highest scorers on the PSAT exam, which is based on skill, ability, and accomplishment.

Siemens Westinghouse Competition -- Each year, team and individual entrants submit research projects in science, mathematics, or technology. Scholarships range from $1,000 for regional finalists to $100,000 for the national winner.

Your child's high school guidance office can provide information on these and other sources of scholarships.

Please be advised that this material is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transactions(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent advisor.

AXA Equitable Life Insurance Company (NY, NY) issues life insurance and annuity products. Securities offered through AXA Advisors, LLC, member FINRA, SIPC. AXA Equitable and AXA Advisors are affiliated and does not provide legal or tax advice. does not provide legal or tax advice.

"AXA" is the brand name of AXA Equitable Financial Services, LLC and its family of companies, including AXA Equitable Life Insurance Company (NY,NY), MONY Life Insurance Company of America (AZ stock company, administrative office: Jersey City, N.J.), AXA Advisors, LLC (member FINRA, SIPC), and AXA Distributors, LLC (member SIPC). AXA S.A. is a French holding company for a group of international insurance and financial services companies, including AXA Equitable Financial Services, LLC. The obligations of AXA Equitable Life Insurance Company and MONY Life Insurance Company of America are backed solely by their claims-paying ability.